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Brian Beutler

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Brian Beutler is TPM's senior congressional reporter. Since 2009, he's led coverage of health care reform, Wall Street reform, taxes, the GOP budget, the government shutdown fight and the debt limit fight. He can be reached at brian@talkingpointsmemo.com

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Brian

In his opening statement, Fed Chairman Ben Bernanke made the case for legislation--soon to be introduced by the administration on the hill--that would create guidelines and authority for the government to take non-bank financial institutions (like, say, Lehman Bros. and AIG) into conservatorship or receivership. Bernanke said:

The decision by the Federal Reserve on September 16, 2008, with the full support of the Treasury, to lend up to $85 billion to AIG should be viewed with this background in mind. At that time, no federal entity could provide capital to stabilize AIG and no federal or state entity outside of a bankruptcy court could wind down AIG. Unfortunately, federal bankruptcy laws do not sufficiently protect the public's strong interest in ensuring the orderly resolution of nondepository financial institutions when a failure would pose substantial systemic risks, which is why I have called on the Congress to develop new emergency resolution procedures. However, the Federal Reserve did have the authority to lend on a fully secured basis, consistent with our emergency lending authority provided by the Congress and our responsibility as central bank to maintain financial stability. We took as collateral for our loan AIG's pledge of a substantial portion of its assets, including its ownership interests in its domestic and foreign insurance subsidiaries. This decision bought time for subsequent actions by the Congress, the Treasury, the Federal Deposit Insurance Corporation, and the Federal Reserve that have avoided further failures of systemically important institutions and have supported improvements in key credit markets.

Geithner said much the same in his own opening statement. That's the line from the administration. What this means for AIG, but also existing banks and other financial institutions is still an open question. Let's see if Geithner or Bernanke or William C. Dudley (President and Chief Executive Officer of the New York Fed, also testifying) tip their hands.

Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke are testifying before the House Financial Services committee as you read this. We'll be following today's hearing pretty closely, both because we (ahem) value your readership, but also because the hearing's shaping up to be much more interesting than originally anticipated.

Two big stories broke yesterday, both of which Josh wrote about over at the mother ship. Suddenly there's much more at stake than the question of when Geithner knew about the AIG bonuses. There's now also the questions of the extent to which the administration has handed over the shaping of bailout possibility to the bad financial actors themselves, and of the possibility that the administration will seek extraordinary power going forward to seize distressed non-bank financial institutions like hedge funds and investment firms. That could have huge ramifications for the government's power over regular banks, which often own such institutions, and, depending on the scope of the legislation, for much smaller institutions as well.

If you've been reading Elana's reporting, you know that many Republicans and some Democrats are opposing the Obama administration's mostly-implicit threat to put health care reform and cap and trade legislation into the budget resolution to immunize them from the filibuster.

Judd Gregg--the ranking Republican on the Senate Budget Committee who came thiiis close to becoming Barack Obama's Commerce Secretary before deciding he'd rather block the president's agenda at almost every turn--compared the idea of passing the bills through the reconciliation process to "running over the minority, putting them in cement and throwing them in the Chicago River." (This, of course, despite his long record of supporting the controversial measures President Bush rammed through the budget.)

If the Campaign for America's Future is taking the lead in opposing the formation of the "Moderate Dems Working Group", then the group Third Way is their foil. When the group was announced last week, Third Way released a statement which read, in part, "We are pleased that a new working group of moderates has emerged in the Senate that is seeking to fulfill the mandate of transformational change, and we are pleased to have been asked to contribute ideas and policies to this vital group."

And that should come as no surprise. Three of Third Way's honorary Senate co-chairs (Evan Bayh, Tom Carper, and Blanch Lincoln) are also leaders of the new working group.

Matt Bennett, a Third Way spokesperson told me "we're very involved.... We were disappointed that the Campaign for America's Future came out against it." He says the group knew that Harry Reid's support would be forthcoming and disputes that the working group will stand athwart the president's agenda.

With a number of major agenda items in the pipeline, will the Senate leadership and outside progressive groups fight the new moderate Democratic caucus in the Senate? Or does the group wield enough power that they're essentially immune to push back?

You may recall that last week, Evan Bayh paid a visit to Joe Scarborough to announce he would lead a working group of conservative Senate Democrats, modeled in some ways after the Blue Dog caucus in the House. At the time, Bayh joked that three or four of the group's fifteen members were in the "witness protection program," too intimidated for some reason or other to publicly align themselves with Bayh et al.

The new coalition could wield tremendous power. Its 15 members comprise just over a quarter of the Democratic caucus, which makes them bigger than the House Blue Dogs whose 49 members make up just under one-fifth of all House Democrats. (And, of course, in the Senate, Democratic votes are more crucial than they are in the House because every major piece of legislation is susceptible to a filibuster).

Many saw the move as the crystallization of the power of Senate moderates, a few of whom famously (or, perhaps, infamously) took control of the stimulus bill and watered it down until it met their approval. At the time, Harry Reid said, "they cannot hold the President of the United States hostage.

But now that several conservative Democrats are aligning to influence legislation on a regular basis, Harry Reid doesn't seem to care at all. In fact, he contributed a quote to Bayh's official press release, saying "If we are going to deliver the change Americans demanded and move our country forward, it will require the courage to get past our political differences and get to work," he said. "New ventures like this group offer us a new opportunity to get things done and I support every effort that puts real solutions above political posturing."

This may be filtering down through the Democratic establishment where, for the most part, there's been complete silence about the working group. The notable exception is the Campaign for America's Future, which has set up an initiative called "Dog the Blue Dogs", encouraging people to "call conservative Democrats in the House and Senate and tell them to not be lapdogs for the...right who want to obstruct the administration's common-sense agenda."

Robert Borosage, co-director for Campaign for America's Future, says "We pushed early and hard because we were alarmed that Bayh et al were publicly opposing the president a majority vote on health care and energy that could be done under reconciliation. This struck us as much more destructive than simply working hard to amend or change the president's program. This is empowering the Republican minority that has made obstruction their signature posture."

The group USAction has joined the Campaign for America's Future in circulating the "Dog the Blue Dogs" request. I have some calls out to other organizations to see whether or not they'll be taking an official position, but early signs suggest they will follow Reid's lead and won't be particularly vocal opponents of the so-called Moderate Dems Working Group.